4) Consider a monopolist who faces the inverse demand function p = 1 – Y and mnarginal revenue MR = 1 – 2y a) Find the price elasticity of demand. as a function of y using the elasticity formula Ay p Дру Price elasticity of Demand b) Set up the profit function when the monopolist faces the cost c(y) = y/2 (marginal cost=1/2) and c(y) = y² (marginal cost =2y) c) Calculate the value of y for each cost function. d) What is the elasticity at the monopolists choice of output for each cost function. That is what is the value of the price elasticity of demand for the function you calculated above (All you have to do is plug the y you calculated into the function you derived above) e) What is the efficient price for each cost function? (Hint:What is an efficent price in a perfectly competitive market) f) What is the deadweight loss generated by the monopolist for each cost function? Show this graphically.

4) Consider a monopolist who faces the inverse demand function p = 1 – Y and mnarginal revenue MR = 1 – 2y a) Find the price elasticity of demand. as a function of y using the elasticity formula Ay p Дру Price elasticity of Demand b) Set up the profit function when the monopolist faces the cost c(y) = y/2 (marginal cost=1/2) and c(y) = y² (marginal cost =2y) c) Calculate the value of y for each cost function. d) What is the elasticity at the monopolists choice of output for each cost function. That is what is the value of the price elasticity of demand for the function you calculated above (All you have to do is plug the y you calculated into the function you derived above) e) What is the efficient price for each cost function? (Hint:What is an efficent price in a perfectly competitive market) f) What is the deadweight loss generated by the monopolist for each cost function? Show this graphically.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.1P

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Similar questions

Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?
Imagine that you ale managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10 less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?
Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?